NBU says it plans to peg hryvnia exchange rate to euro, not US dollar

8 September, 08:41 PM
Can the NBU peg the hryvnia exchange rate to the euro, and not to the dollar (Photo:NBU press center)

Can the NBU peg the hryvnia exchange rate to the euro, and not to the dollar (Photo:NBU press center)

Integration into the European Union is an important factor in economic and political development, so the hryvnia exchange rate in future will be pegged to the euro, not the U.S. dollar, Deputy Governor of the National Bank of Ukraine (NBU), Yuriy Heletiy, said at a briefing on Sept. 8.

Among other things, the following must happen to make this a reality:

• further development, expansion of economic ties, in particular trade ones, with the EU;

• political rapprochement between Ukraine and the European Union.

“Hypothetically speaking, we’d be able to implement it now,” he said.

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“But of course, in addition to the economic and political prerequisites, we must analyze the difficulties we may face. The dollar currently significantly prevails in the structure of foreign economic operations – on the interbank and cash markets, loans and deposits are mostly in dollars.”

Heletiy added that the dollar also prevails in the structure of gold and foreign reserves.

“And pegging to the dollar is more common for the population,” he said.

“If we did a re-pegging now, of course, it might provoke some uncertainty, and as a result, create volatility in the foreign exchange market.”

The deputy governor also emphasized the process should be prepared operationally, starting from calculating the official exchange rate, to optimizing the structure of gold and foreign exchange reserves.

“As soon as such prerequisites are met and finalized, we’ll move in this direction, but for now, we don’t plan to implement it practically,” he said.

Earlier the Board of the National Bank of Ukraine decided to keep its key policy rate at 25% per annum.

According to the regulator, under current conditions, such level of the key policy rate is sufficient to maintain exchange rate stability and keep inflation processes under control.

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